Obamacare is back at the Supreme Court. On Wednesday the court heard oral arguments in King v. Burwell, and the consensus seems to be that it’s unclear which way the court will rule. That said, Americans should be paying more attention to the case than they are, as not only might it bring down Obamacare, but it could have even more profound implications on some of our most fundamental principles.
To understand why the case matters beyond Obamacare, it’s first necessary to know the basics.
The healthcare law directed states to establish healthcare exchanges that meet various criteria. To encourage their use, it mandated coverage at threat of financial penalty, while also providing subsidies to qualified individuals who purchase plans on the exchanges.
The plaintiffs are challenging a decision by the IRS to extend those penalties and benefits to people who use exchanges made by the federal government. Why is that being challenged? Because the law explicitly authorizes them only for “an exchange established by the State.” Those pursuing the suit argue that the IRS overstepped its bounds and unconstitutionally rewrote the law.
Defenders of the law have put forth varying arguments since the issue first began to gain prominence. First they said it was just a typo or glitch. Then that HHS is merely running the states’ exchanges on their behalf, but that they should still be considered established by the states. Then that the entire phrase is just a “term of art” and a “technical term” that “reflects style and grammar—not a substantive limitation.”
There is evidence to support the challengers’ argument. Unearthed tapes revealed that Jonathan Gruber, one of the law’s chief architects, said in 2012 that, if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits.” The quote came before the lawsuit, and thus before he had political reason to lie. Now that the law is threatened, he has backtracked and attempted to explain away the comments. But his excuses don’t stand up to scrutiny.
In addition, the IRS removed the same phrase used in the law, about exchanges being “established by the State,” from their proposed rule implementing the tax credits after reading an article that argued it represented an unconstitutional commandeering of the states in violation of the 10th Amendment. This is significant because the government can’t actually tell the states to establish exchanges, as that violates our federalist system of dual sovereignty. And certain attempts to skirt the 10th Amendment through enticements are also prohibited, though a lot of policies that are allowed arguably still cross the line. But offering tax credits to citizens using some exchanges and not others as a means to compel the states to act would likely be seen as unconstitutional. So by removing it from their rule the IRS may have been acting with a political motivation to save the law.
It’s not hard to understand why a ruling against the government could seriously disrupt Obamacare. A total of 38 states either refused or failed to establish their own exchanges, forcing HHS to do so for them. If citizens in those states are not able to take advantage of the tax credits designed to mitigate the higher costs of Obamacare compliant plans, more expensive on average due to mandates in the law for specific coverage requirements, while also not facing threat of financial penalty, then many will simply drop coverage. This could send the system into a fiscal death spiral.
The Left has been using that fact in an effort to intimidate the court into upholding the IRS’ creative interpretation. But it’s not the court’s job to save lawmakers from enacting bad or unworkable policy. Nor is there anything stopping the political branches from fixing the problem by choosing from any number of available options. In a representative system, it’s best that courts allow the elected branches to resolve problems wherever possible.
Beyond Obamacare, the case is important in a couple of ways. As touched on already, there are federalist implications. If the justices side with the challengers and rule that the IRS overstepped its bounds by effectively rewriting the law, then they are left with the question of whether or not the law improperly seeks to coerce the states into doing the bidding of the federal government.
If they then fail to strike that portion of the law it will be a blow to federalism and, by extension, individual liberty. While states are not necessarily better at protecting rights than the federal government, competition between the two via federalism does a better job of preserving liberty than does dominance by either level. If Congress is allowed to use such tactics to force state to do their bidding, we will no longer benefit from federalism and its contribution to checks and balances.
Speaking of checks and balances, the case also could have far reaching repercussion on the separation of powers. If the court rules in favor of the government, it will mean that the executive branch is free to rewrite legislation despite the clear meaning of a law if they can plausibly argue that the consequences for not doing so would be negative. It is, at its core, a case about who gets to write the law.
It’s true that Congress typically gives the Treasury department more latitude than typical because of the complexity of the tax code. But where Congress has not said to fill in the blanks, Treasury must follow the law, as must any other agency within the executive branch. To allow otherwise would undermine a fundamental principle of our government: that we are a nation of laws, which are created by elected representatives.
As an example of what to expect if the court allows for erosion of the separation of powers, consider the current call by Sen. Bernie Sanders – self-described socialist – for the White House to rewrite the tax code without Congress.
He wants Obama to declare by fiat the elimination of certain “loopholes.” But what are commonly referred to as “loopholes” are really just particular policy choices made by elected leaders. They can be either good, such as those which alleviate double taxation, or bad, such as those which provide special handouts for politically favored businesses. Regardless, they are part of the tax code which Congress has created, as is their legal prerogative. If they don’t like it they should legislate a new tax code, and if we don’t like it we can vote them out of office.
To be fair, some of the items Sanders mentions were created by Treasury within the boundaries of Congressional authority, so those can be similarly removed. But others were policy choices made be elected officials exercising the authority they derive directly from the people. To have their decisions reversed by unelected bureaucrats is tantamount to stripping political power from the American people.
This White House has been open about its desire and willingness to rewrite the law as Obama sees fit in order to advance his agenda. And his spokesman responded favorably to Sen. Sanders suggestion, saying that Obama is “very interested” in unilaterally hiking taxes. If the court rejects the latest challenge to Obamacare and finds in favor of the government, it will only serve to embolden his efforts to unconstitutionally transform the nation.
Brian Garst is a political scientist, commentator, and advocate for free markets and individual liberty. He also blogs at BrianGarst.com and you can find him on Twitter @BrianGarst.
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